EDIT: At the time I wrote this post, I didn’t know of the existence of this great one, from Christopher Gandrud, take a look!
On april, the 15th, an article was published that will change economic theories… Or at least, it will questionate and change the methods employed to formule those theories. As a doctor, I spend time on reviewing evidence that can be applied to daily practice. I should right now be reviewing papers, studying or going for a walk, but I came across weird news last week: A paper of CM Reinhart and K Rogoff, published in January 2010 defending austerity, was questioned by a student, Thomas Herndon and two of his professors.
Among other statements, Reinhart and Rogoff basically collected data and wrote that, if a country reached more than 90% of debt respect to its GBP, growth would become abruptly negative. It would be another scientific paper if there weren’t happened two things:
- Many politicians, institutions, countries or even the European Union, have assumed quickly these facts, without revisiting or trying to reproduce them. This happens all the time, but it shouldn’t happen. It increases the chances that flawed studies reach the status of ‘science’. Sometimes with dramatic consequences.
- A scientific research should be reproducible. It means it should render the same results when repeating the study. But when Herndon tried to replicate it, he found big errors -bad excel coding, data collected selectively- and a dubious weighting method, that when corrected, gave completely different results.
It’s a scatterplot with data modelled by a generalized additive model (GAM), and what drawed my attention at first sight was that the correlation between Debt/GDP ratio and growth is non-linear, and surprisingly weak. Neither debt seems to increase growth nor seems to be heavily associated to recessions -note that I don’t know much of Economics-. ¿What do you think about these data?